Non-Resident State Withholding Requirements

See FTB Pub. 1017 (Rev 04-2011)

Current withholding rate is 7%.

Individuals and entities can request a waiver on withholding payments by filing a form 588 (non-resident withholding waiver request) with the Franchise Tax Board.

Income subject to withholding Include:

  • Payments made for personal services performed in California.  The location where the personal services are performed determines the source of income
  • Payments made to nonresident entertainers for services rendered in California
  • Distributions of California source income
  • Rents and royalties from assets located in California.

Nonresident entities subject to withholding include:

  • Individuals who are nonresidents of California
  • Corporations that do not have a permanent place of business in California and are not qualified through the office of the Secretary of State (SOS) to do business in California
  • Partnerships and LLCs that do not have a permanent place of business in California and are not registered through SOS.
  • Nonresident estates and trusts
  • Partnerships that do not have a permanent place of business in California.

The following individuals and entities are exempt from withholding:  Exemptions apply to the actual payee and not to their agent or representative.

  • California residents
  • Corporations with a permanent place of business in California
  • Corporations qualified through SOS to do business in California
  • Partnerships and LLCs with a permanent place of business in California
  • Tax exempt organizations, under either California or federal law.

Backup withholding replaces all other types of withholding and there are no waivers for backup withholding. Certain payees are exempt, such as government entities and tax exempt organizations.

Backup withholding applies when:

  • The payee does not provide a taxpayer identification number (TIN) or provides and invalid TIN
  • Fails to certify exemption from backup withholding.